You may have heard that Congress passed the Emergency Coronavirus Relief Act of 2020 (ECRA). This 5,465-page document is being presented to the President for signature. Assuming that it is signed, there are very significant changes to your business.
PPP and small business support: New Covid -19 package provides much needed support for small businesses.
- Business expenses paid for with the proceeds of the PPP loans are tax deductible.
- The loan forgiveness process is simplified for borrowers with PPP of $150,000 or less.
- If your initial loan was computed with less than the amounts entitled, you may get additional funds. If you already got forgiveness on the PPP loan, you may not be eligible for this part.
- Certain businesses that had a reduction of revenues of 25% or more may get additional PPP loans. This is a complex calculation, but many people experienced such a decline.
Economic Impact payment (EIP): Certain taxpayers will receive a second round with reduced amounts of $600 and $600 for a child. If you were eligible this spring, you will probably be eligible now.
There is Rental Assistance until January 31, 2021 and Student Loan forbearance through April 1, 2021.
There are payroll tax delays, tax extenders, charitable contribution changes and other tax law changes.
In a unanimous vote, the U.S Senate passed the Paycheck Protection Program Flexibility Act of 2020. The legislation, which moved through the U.S. House of Representatives last week, creates more flexibility for borrowers and extends the time period for businesses to use the funds from eight weeks to 24 weeks, and changes the ratio from 75/25 to 60/40 for payroll to other fixed costs. Other updates include:
- Extending the repayment period to a minimum maturity of five years after application for forgiveness with a remaining balance.
- Access to payroll tax deferment for businesses that received PPP loans.
- Extending the rehiring deadline to align with expiration of enhanced unemployment insurance benefits.
The bill now goes to the President’s desk for his signature.
We expect the forgiveness PPP loan application to change based on the new legislation. If your business has been awarded a PPP loan, you will need to work with the lender which provided you the loan. Many of these financial institutions will require that you use their forms to apply for forgiveness (not the standard SBA form), and they may require that you provide your PPP forgiveness application and documentation on-line.
Additional information can be found here: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program